Exchange rate uncertainty and import prices in the euro

Abstract

This paper analyses the effects of exchange rate uncertainty on the pricing behaviour of import firms in the euro area. Uncertainty is measured via the volatility of the structural shocks to the exchange rate in a non-linear VAR framework and is an important determinant of import prices. An increase in exchange rate uncertainty is associated with a fall in prices on average, which suggests that the exchange rate risk is borne by the importers. The analysis utilizes a dataset on industrial import prices, disaggregated by origin of imports. Controlling for intra- and extra-euro area trade is important.

Publication
Review of International Economics, 27(5): 1537-1572
Boris Blagov
Boris Blagov
Economist

My research area is applied Macroeconomics, particularly using cutting edge mathematical models to analyse economic relationships and create better forecasts.

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